What everyone seems to agree upon with the US tax code is:
- It’s too complex!
- It’s too riddled with silly exemptions and loopholes (except for the ones I use)
- I pay too much in taxes!
- I pay too much in taxes, especially compared to [fill in the blank, usually “deadbeat rich” or “deadbeat poor”]
The complexity of the US tax code is legendary, largely due to all the silly exemptions and loopholes. The problem, of course, is that the tax code is intended to do two things: raise money for the government and implement social policy. If we were worried about only the former then a flat tax, or a national sales tax, would be easy. It’s the details of the latter that drive everyone nutty.
Everyone is in favor of some tax break, incentive, refund, or deduction or another. The obvious ones — charitable contributions and mortgage interest — are so popular (and serve, arguably, such a valuable purpose) that eliminating them would be politically unfeasible and have huge unintended consequences.
The same is true for other tax breaks. Some are simple pork — easing taxes on plaid alpaca farmers to get their support next election (or to satisfy Cousin Frim, the farmer) — but some are for arguably legitimate purposes (helping local plaid alpaca farmers against import dumping by those evil Chinese striped alpaca farmers) — and in either case, the economy distorts around them, meaning getting rid of the loopholes will hurt folks (alpaca feed producers, plaid alpaca vest manufacturers) beyond just the “fat cat” plaid alpaca farmers.
So rather than repeal, the tax code gets further modified to curb abuses by tweaking the code — coming up with ever-more-rococo definitions of what’s a charity, for example, as well as how to report it, what’s a valid contribution, how to value it, how to document it, what limits to set on what kinds of deductions can be made — and, the next thing you know, multiplied by 100,000 different deductions, you have … the US tax code.
Bleah. And simply wiping out big volumes of it is like trying to “rightsize” a company with a machine gun. It’s a delicate, nasty operation at the best of times, and the distortions (or values) added by the political process make it even more thankless (and less likely to happen).
Note that much the same can be said for the “I pay too much in taxes” — much of that perception tends to stem from what federal (or state, or local) spending they consider worthwhile, and much of that is what directly affects them. As much as Congress dicks around with the tax code, I’m not sure we’d have anything more coherent — or less costly — if we threw it all open to a popular vote, clause by clause.
Don’t get me wrong — I’d love to (a) be able to fill out my taxes on a postcard in 5 minutes, and (b) pay lower taxes. I’m not sure I’d love the cost of doing so, though, and I’m not sure society would, either. Simply “simplifying” things is godawfully tempting, especially around 15 April, but it’s a suggestion that needs to be examined carefully for the unintended consequences that will almost certainly ensue.
Heck…
I’d just like tot go back to a progressive tax code, and toss out everything that the idiot and his minions have passed in the past 5 years.
Another factor in the complexity of the tax code is the vast economic machinery that exists in order to help people deal with that complexity. Those who have invested in that economic machinery want it to continue to exist, and they vote. They also spend money to support their candidates, and work the political system to try to ensure that their livelihood is maintained. Tax lawyers, accountants, tax preparation companies, tax preparation software companies, investment advisors, and others all have a vested interest in the continued complexity of the tax code.